1455 Pennsylvania Avenue NW, Suite 1200, Washington, DC 20004

September 24, 2015

FILED ELECTRONICALLY

Office of Regulations and Interpretations

Employee Benefits Security Administration

U.S. Department of Labor

200 Constitution Avenue, N.W.

Room N-5655

Washington, DC 20210

Office of Exemption Determinations

Employee Benefits Security Administration

U.S. Department of Labor

200 Constitution Avenue, N.W.

Suite 400

Washington, DC 20210

Re: Definition of the Term Fiduciary; Conflict of Interest Rule (RIN 1210-AB32)

Proposed Amendment to Proposed Partial Revocation of Prohibited Transaction 

Exemption 84-24 (ZRIN: 1210-ZA25)

Proposed Best Interest Contract Exemption (ZRIN 1210-ZA25)

We are writing on behalf of the Committee of Annuity Insurers (the “Committee”) in 

follow up to the Committee’s testimony at the Department of Labor’s (the “Department’s”)

Public Hearing on Conflicts of Interest conducted August 10-13, 2015 (“the hearing”). The 

Committee is a coalition of life insurance companies formed in 1981 to participate in the 

development of federal policy with respect to annuities. The Committee’s current 29 member 

companies represent more than 80% of the annuity business in the United States and are among 

the largest issuers of annuity contracts to IRAs and employer-sponsored retirement plans. A list 

of the Committee’s member companies is attached. 

This letter supplements the Committee’s previous comment letter submitted on July 21, 

2015 by offering clarification and further background on some of the key issues raised during the 

hearing. In this follow up letter, we:

 Summarize how the proposal, in various ways, will have the effect of 

discouraging use and understanding of annuities and other guaranteed income 

products. 

 Provide follow-up comments regarding the changes needed to the proposal’s 

definition of “investment advice,” including addressing insurance companies 

acting as issuers, or manufacturers, of annuity contracts.

 Provide specific follow-up comments on the changes needed to the Department’s 

proposed prohibited transaction exemptions, including the Best Interest Contract 

Exemption.
Committee of Annuity Insurers Comment Letter re: Fiduciary Proposal

September 24, 2015

Page 2 of 12

 Discuss our concerns regarding the overall process of the rulemaking, including a 

discussion of the rule’s effective date, regulatory impact analysis, and the 

Committee’s request for a re-proposal prior to finalizing the rule.

We continue to be heartened by the Department’s sincere and repeated assurances that 

the rule proposal does not seek to pick winners and losers, or to ban specific types of product 

distribution, such as brokerage or proprietary sales; specific types of compensation, such as 

commissions; specific types of investment strategies, such as actively managed funds; or specific 

types of products, such as annuities with their important lifetime income guarantees. Our 

comments are aimed to implement those assurances.

I. How the proposal discourages understanding and use of lifetime income products.

During the August hearing, Department panelists expressed support for lifetime income 

options and emphasized the value of such products.

1

 Committee members appreciate and 

commend the Department for publicly recognizing the value of annuities.

On the other hand, Department officials appeared skeptical that the proposal would 

reduce access to, understanding, and use of lifetime income options such as annuities. In our

July comment letter, we laid out some specific concerns regarding the proposal which, taken 

together, will have the unintended and unfortunate consequence of making it harder, not easier, 

to ensure Americans have the income they need in retirement:

 The proposed definition sweeps in sales conversations where there is no reasonable 

expectation of fiduciary status, which takes away choices by turning ordinary sales 

conversations into fiduciary undertakings. Insurers may have to limit and restrict 

annuity sales to plans and IRAs, either because they are unwilling to take on fiduciary 

status or are unwilling or unable to comply with a prohibited transaction exemption.2

 The Best Interest Contract Exemption (BICE) discourages the sale and the use of 

annuities through a number of provisions that many commentators have identified:

3

o The requirement to offer a “broad” range of asset classes disadvantages 

annuity issuers and their agents and brokers who focus on a particular product 

or set of similar products.

o The requirement for a “Total Cost” disclosure suited for mutual funds, not 

annuities.

o The requirement to act “without regard to the financial or other interests” of 

the adviser or insurance company.

 

1 Conflict of Interest Proposed Rule, Related Exemptions, and Regulatory Impact Analysis Hearing 

Transcript (“Hearing Transcript”) 528:19 – 530:10.

2 Committee of Annuity Insurers Comment Letter Regarding Fiduciary Proposal (July 21, 2015) (“CAI July 

Comment Letter”) 23 – 26.

3 CAI July Comment Letter 35 – 41.
Committee of Annuity Insurers Comment Letter re: Fiduciary Proposal

September 24, 2015

Page 3 of 12

o The requirement not to have any compensation policy that will “tend to 

encourage” recommendations that are not in the best interest of the client, 

which we and a number of other commenters believe will discourage long 

accepted insurance commission practices because of concern that it will be 

very difficult to prove that a particular insurance commission is specifically 

justified by the time and expertise needed by the agent or broker.

 PTE 84-24, which has become critical for nearly every sale of an annuity, needs to be 

adjusted in several very important ways, as detailed in Section IV of our comment 

letter.4

 The Department’s changes to the education carve-out will make it difficult to provide 

information of any substance to the owner of an annuity (see more comments on this 

topic below).5

Based on the above referenced concerns, the Committee would like to reiterate its belief 

that the proposed rule will reduce access to, understanding, and use of lifetime income options 

such as annuities. The Committee encourages the Department to further consider the proposed 

rule’s impact on the availability of such products in light of these concerns.

II. Follow up regarding the meaning of “recommendation.”

A. Communications that constitute a recommendation.

Committee members are concerned that the proposed rule does not clearly distinguish 

between communications that constitute a “recommendation” triggering a fiduciary relationship

and communications that do not. With the exception of appraisals, the proposed rule does not 

trigger an investment advice fiduciary relationship unless there is a “recommendation,” which is

defined as “a communication that, based on its content, context, and presentation would be 

viewed as a suggestion that the advice recipient engage in or refrain from taking a particular 

action.” As we discussed in our previous comment letter, we believe a “suggestion” is too low a 

bar to trigger an investment advice fiduciary relationship and urge the Department to revise the 

definition of “recommendation” to expressly require a “call to action” or “advocacy for a course 

of action.” After all, the word suggestion can mean as little as a “faint hint or indication.”6

At the hearing, Department officials repeatedly emphasized that the Department intended 

a recommendation to require a “call to action,” even though the proposal contains no such 

requirement.7 (Although the preamble to the proposed rule references FINRA Policy Statement 

01-23 in relation to the definition of a “recommendation,” the proposed rule’s actual definition of 

a “recommendation” does not expressly mention a “call of action.”) Committee members urge 

 

4 CAI July Comment Letter 16 – 23.

5 CAI July Comment Letter 28 – 30.

6

Suggestion, Webster’s New World Dictionary (2d College ed. 1986); see also Merriam Webster Online, 

available at http://www.merriam-webster.com/dictionary/suggestion (“a slight indication.”)

7 Hearing Transcript 718:4 – 719:21: 723:1 – 11; 851:16 – 852:9.
Committee of Annuity Insurers Comment Letter re: Fiduciary Proposal

September 24, 2015

Page 4 of 12

the Department to implement this intention by removing any reference to a “suggestion” and 

expressly requiring a “call to action” or “advocacy for a course of action.” The Committee

would welcome and fully support such a revision and is concerned that a failure to provide such 

clarification will result in too much uncertainty. Such uncertainty could harm retirement 

investors by eliminating access to valuable information because of concern that the provision of 

such information could be characterized as a “suggestion,” and thus a recommendation, in the 

absence of a call to action.

We would point out, however, that it is not enough to modify the definition of 

“recommendation” in the proposal. As we detail in our letter, further changes are necessary to 

the definition to prevent non-fiduciary communications from being swept under the scope of the 

proposed rule:

 “Directing” a communication at an individual should not be part of the test.

 The Department should require a “reasonable expectation that the advice will be 

relied upon” in making decisions, or that the recommendation will be a “material 

part of the decision making.”

 The Department should make clear that simply referencing facts, like age, 

expected retirement date, risk tolerance, safety of an annuity issuer, or longevity, 

that help individuals understand the pros and cons of an investment product, 

choice, or strategy, does not mean the communication has been “individualized.”

B. Investment Education.

As we described in our previous comment letter, annuities are unique in that they provide 

guaranteed income and insurance protection against longevity risk by pooling risk among a large 

group of individuals, so that no single individual bears the burden of the entire risk alone. These 

unique features are not present in investment products like mutual funds. Because of their

unique and beneficial features, annuities require greater investor education in order to assist

retirement savers to make appropriate decisions. 

In order to provide retirement investors with adequate education about annuities, the 

definition of investment education should be clarified to expressly include descriptions of an 

investment product itself, including a description of an annuity’s distribution options. 

Throughout the hearing, comments from Department panelists gave the impression that the 

description of a particular investment, including descriptions made in a product’s relevant 

disclosure materials, would qualify as investment education, rather than investment advice.8 

This is a much welcomed development and the Committee encourages the Department to 

expressly make this distinction by including “descriptions of investment products” under the 

enumerated categories of investment education found in the proposed rule. In the absence of an 

express carve out, we are concerned that the current definition of investment education is too 

ambiguous and could create unpredictable risks when simply describing a product’s features. 

Such a result could significantly limit access to much-needed information currently available to 

 

8

 Hearing Transcript 718:4 – 719:21; 992:19 – 993:10.
Committee of Annuity Insurers Comment Letter re: Fiduciary Proposal

September 24, 2015

Page 5 of 12

retirement investors in a way that would discourage annuitization and harm retirement investors 

who could significantly benefit from the purchase of an annuity. 

Beyond the simple “description of investment products,” we also urge the Department to 

expressly clarify that the investment education carve out also includes communications generally 

discussing the advantages and disadvantages of annuitization or other distribution options (like 

living benefits) available under a contract.

9

 Our previous comment letter explained how such 

conversations could possibly be understood as a “suggestion” that could inappropriately trigger 

an investment advice fiduciary relationship.

10

 

Despite this request in our previous comment letter and similar requests from other 

witnesses and written comments, few questions or comments from Department panelists

suggested that the Department is considering an expanded definition of investment education that 

would expressly cover communications discussing the general advantages and disadvantages of a 

particular investment product, so long as the communication does not advocate a particular 

course of action. The Committee believes that a failure to revise the rule in a way that covers 

such conversations could harm retirement investors because investors will not be able to obtain 

the information they need to make an informed decision about their ability to purchase or elect 

an annuity.

Finally, Committee members believe that there are circumstances when it is appropriate 

for service providers to reference specific investments in educational materials, especially when 

the investment has already been selected by the plan fiduciary. Throughout the hearing, the 

Department’s panelists asked witnesses whether the rule would be improved if it allowed 

specific references to investments in the retirement plan context when all other investments of 

that type are also referenced.11 The Committee appreciates the Department’s recognition of 

areas where the investment education carve out can be improved and supports a rule that will 

allow service providers to connect investment education with plan-specific investments.

The foregoing comments can be illustrated with a few examples. First, suppose a plan 

purchases a group variable annuity that offers various mutual funds and fixed investment options 

among which participants may allocate their investment and a number of annuity distribution 

options. The plan fiduciary selects and monitors those investments and annuity distribution 

options. All of the following should be considered education:

 Explaining the features of the group annuity contract to the plan fiduciary and 

answering questions from the plan fiduciary, provided there is no advocacy or call 

to action.

 

9 We would distinguish conversations regarding an individual’s specific circumstance, which involve 

advocacy of a particular one course of action, from general conversations in which the pro and cons, in general, of 

particular annuitization and other distribution options are discussed. 

10 CAI July Comment Letter 28.

11 Hearing Transcript 38:7 – 41:10; 345:18 – 346:8.
Committee of Annuity Insurers Comment Letter re: Fiduciary Proposal

September 24, 2015

Page 6 of 12

 Offering participants asset allocation education which references the mutual funds 

or other investments available through the contract that fall into a particular asset 

class.

 Explaining the annuity distribution options available under the contract, including 

the advantages and disadvantages of one option over another, as long as there is 

no advocacy or individualized recommendation for a particular distribution 

option.

Second, suppose an IRA owner purchases a fixed annuity contract that offers a range of 

withdrawal and annuitization options, including a guaranteed living withdrawal benefit, various 

forms of life contingent annuities, and a term certain annuity. The issuer of the contract, or its 

agent or broker, should be able to explain these options, provide education regarding how they 

operate, and the pros and cons of each option, without triggering fiduciary status.

C. Annuity manufacturers.

As currently drafted, the proposed definition of an investment advice fiduciary is too 

ambiguous and could create unwarranted liability for life insurance companies that issue 

annuities (sometimes called the annuity “manufacturers” or “producers”). During the hearing, 

Department panelists seemed to suggest that such manufacturers need not worry about 

investment advice fiduciary liability unless they are actually providing a recommendation to an 

advice recipient in the FINRA sense.12 This interpretation is not clear from the proposed rule 

and Committee members request the Department to expressly exclude manufacturers of 

annuities, so long as the insurance company does not render investment advice for a fee or other 

compensation related to such advice with respect to such insurance or investment products or 

represent or acknowledge that it is acting as a fiduciary.

This clarification is important for insurance companies in two ways. First, under state 

insurance laws, insurance products can only be sold by state licensed agents that are appointed 

(authorized) as agents by each insurance company whose product the agent sells. The 

appointment is the mechanism to tie the insurance company to the acts of the agent when selling 

that company’s insurance products under state insurance law. This appointment process should 

not, by itself, turn the insurance company into a fiduciary.13 Similarly, the appointment process 

should not, by itself turn an insurance company into a Financial Institution for the BICE, as 

discussed below.

Second, expressly excluding product manufacturers is important when insurance 

company employees are marketing their products to financial advisers and broker dealer firms in 

what is sometimes called “wholesaler” conversations. This is a clear sales context – both sides 

understand this – and the insurance company is not communicating to the end-user plan, 

 

12 Hearing Transcript 722:14 – 725:25.

13 Other commenters from the annuity industry have suggested specific language to address this point and 

we urge you to consider those suggestions.
Committee of Annuity Insurers Comment Letter re: Fiduciary Proposal

September 24, 2015

Page 7 of 12

participant, or IRA owner, but may be communicating with someone who serves as a fiduciary 

investment adviser. These wholesaler conversations should not be considered fiduciary advice. 

III. Changes are necessary to provide appropriate and workable PTEs.

A. Retain variable annuities under PTE 84-24.

The Committee strongly encourages the Department to retain the current scope of PTE 

84-24 by making it available to all annuity contracts. Despite significant written comments and 

live testimony from numerous commenters and witnesses who share this position, the Committee

is concerned with how few of the questions and comments from Department officials at the 

hearing sought further clarification and input on this critically important issue. We are 

concerned that the absence of any meaningful discussion on this question during the hearing 

reflects a misunderstanding by the Department of how the exclusion of variable annuities from 

PTE 84-24 will harm retirement investors by limiting access to variable annuities. Accordingly,

we would like to take this opportunity to reiterate our concerns.

The exclusion of variable annuities from PTE 84-24 will constrain variable annuities to 

the BICE, which entails significantly more conditions and more cost than PTE 84-24. We are 

concerned that the greater cost associated with the BICE could create a disincentive for one kind 

of annuity, variable, to be sold over another type of annuity, fixed, without regard to an 

individual retirement investor’s needs. We strongly believe that retirement savers should have 

the opportunity to choose one product over another based on the actual economic benefit to the 

investor based on their needs; not which annuity is subject to one prohibited transaction 

exemption or another.

In any event, the exclusion of variable annuities from PTE 84-24 does not make 

analytical sense because such a distinction misunderstands the fact that variable annuities are not 

the same as mutual funds or other securities that fall outside the scope of PTE 84-24. For 

example, variable annuities, unlike mutual funds, provide insurance protection against longevity 

risk by pooling that risk among a large group of individuals, so that no single individual bears the 

burden of the entire risk alone. Additionally, variable annuities often include guaranteed death 

benefits and/or guaranteed living benefits, wherein the insurer guarantees specified minimum 

values or payments irrespective of market fluctuations. 

For the reasons described above we strongly encourage the Department to retain the 

current scope of PTE 84-24 by making it available to all annuity contracts.

B. The BICE is unworkable under the current proposal.

As we expressed in our July comment letter, the Committee supports a principles-based 

exemption ensuring that anyone who provides investment advice acts in their client’s best 

interest. The BICE, as currently proposed, falls short of this goal and is not workable in its 

current form. Accordingly, if the Department does not make PTE 84-24 the model principles-
Committee of Annuity Insurers Comment Letter re: Fiduciary Proposal

September 24, 2015

Page 8 of 12

based PTE, as suggested in our previous comment letter, we urge the Department to vastly 

simplify the BICE.

The Department’s comments and questions during the hearing appeared to reflect a 

willingness to simplify the BICE in order to make it a more feasible exemption.

14

 We appreciate

the Department’s willingness to make changes in response to many of the administrative 

concerns raised by commenters and have outlined recommendations below to address the BICE’s

shortcomings. 

i. Administrative and mechanical changes to the BICE.

Timing of the contract: Committee members appreciate the comments and questions 

from Department panelists seeking recommendations on the best approach to address the BICE’s 

timing problem. As drafted, the BICE requires investment advisers and advice recipients to enter 

into a contract before any discussions begin. Our previous comment letter outlined our concerns 

with this timing issue and recommended that the Department, at the very least, adopt a rule that 

would only require a signed contract on or before the transaction that would otherwise trigger a 

prohibited transaction (such as the payment of compensation to the adviser or the purchase of a 

security or other property) occurs. Although we ultimately believe that the contract requirement 

should be removed altogether, a contract requirement closer to the point of sale would be a 

welcomed improvement to the BICE as currently proposed.

Current customers: As we stated in our previous comment letter and discuss further in 

section IV below, we urge the Department to expand the BICE’s grandfathering provision to 

cover communications made after the rule’s effective date with respect to an annuity that was 

purchased prior to the effective date. If the Department, nonetheless, decides to apply the 

proposal to annuities purchased prior to the effective date, a workable solution is absolutely 

required. For existing customers (which we believe should include owners of annuity contracts 

who make additional premium payments after the rule goes into effect), the Department 

suggested a willingness to adopt a “negative consent” approach to the BICE, whereby an adviser 

or financial institution would simply notify its current customers that it will undertake future 

advice under a best interest standard.

15

 The Committee believes a negative consent approach is 

the only workable solution. 

ii. Significant changes required to make the BICE workable.

Reasonable compensation: During the hearing, panelists from the Department also 

sought clarification on ways in which the Department could improve the BICE’s requirement for 

total compensation not to exceed “reasonable compensation” in the context of variable annuities. 

Although the Committee opposes adoption of a rule that would constrain variable annuities to the 

BICE, we commend the Department for recognizing that the BICE’s “reasonable compensation” 

 

14 Hearing Transcript 87:13 – 88:72; 574:22 – 575: 25; 669:8 – 670:12.

15 Hearing Transcript 295:15 – 296:4; 574:22 – 575:25.
Committee of Annuity Insurers Comment Letter re: Fiduciary Proposal

September 24, 2015

Page 9 of 12

requirement is uniquely flawed in the context of variable annuities.

16 As discussed in our July

comment letter, the BICE’s “reasonable compensation” requirement departs from the current 

regulatory framework by requiring service providers to determine whether or not compensation 

is reasonable.

17

 To relieve this incongruity, we encourage the Department to create a rule that 

would define reasonable compensation as it is understood for the purposes of PTE 84-24. Under 

such a framework, the reasonableness of compensation would be determined by the independent 

plan fiduciary’s (or IRA owner’s) willingness to purchase an annuity after receiving the 

appropriate fee disclosures. Any other standard puts service providers and product 

manufacturers in the impossible position of having to benchmark themselves.

BICE disclosures: Among other concerns raised in our previous comment, the 

Committee would like to take this opportunity to comment on the hearing’s coverage of the 

BICE’s disclosure requirements. The Committee is concerned that the production and 

distribution of the BICE disclosures will result in significant costs for the annuity industry while 

providing essentially no additional utility for retirement investors beyond the disclosures already 

required by state and federal law.

We believe that the disclosures in Part II(e) and Part III of the exemption should be 

deleted18 and replaced with three disclosures:

 A requirement to disclose conflicts of interest that are material.

19

 A requirement to provide, upon request in connection with the sale, the information 

regarding direct and indirect compensation based on the 408(b)(2) disclosure rules, as 

though the Retirement Investor were the “responsible plan fiduciary” and the plan or IRA 

is the “covered plan.”20

 A requirement to provide a disclosure as would be required by the Department’s 404a-5 

regulation for any asset recommended for investment.

 

16 Hearing Transcript 160:24 – 161:10.

17 The concept of “reasonable compensation” is well understood. What makes the BICE unworkable is that 

it requires that the Adviser and Financial Institution must affirmatively agree that no Asset will be recommended 

unless the total compensation to be received is reasonable and makes this agreement enforceable as a contractual 

matter. We have no doubt that such a requirement would lead to widespread and expensive litigation. 

18 For the reasons many commenters have raised, Section V(a) and (b) and all of Section IX of the BICE 

should also be deleted.

19 As we point out in our comment letter, while the defined term in the BICE is “Material Conflict of 

Interest,” the definition of the term does not actually contain a materiality element. This definition should be 

modified to focus on material financial interests, such as a commission or other material payment that will be 

received in connection with the purchase or sale of an insurance or annuity contract. See CAI July Comment Letter 

22.

20 In particular, it is critical that such disclosure be allowed to use ranges of compensation, which the 

Department has allowed in the context of 408(b)(2), provided any range of compensation or cost provides “sufficient 

information to permit evaluation of the reasonableness of the compensation or cost.”
Committee of Annuity Insurers Comment Letter re: Fiduciary Proposal

September 24, 2015

Page 10 of 12

Best interest standard: Committee members are also concerned with how the BICE 

defines the best interest standard. As currently proposed, the best interest standard requires an 

investment advice fiduciary to act “without regard to the financial or other interest of the 

Adviser, Financial Institution or any Affiliate, Related Entity, or other party.” During the 

hearing, Committee members were pleased to hear Department panelists express a willingness to 

reconsider the “without regard to” requirement, including the removal of the problematic 

language altogether.21 In response to these discussions, the Committee would like to reiterate 

our position that the enunciation of prudence in ERISA section 404, which looks to the actions of 

a prudent fiduciary in circumstances similar to those then prevailing, is a more straightforward 

test than the proposed best interest standard requiring advisers to act “without regard to” the 

adviser’s financial or other interests. Accordingly, we encourage the Department to adopt a best 

interest standard that would remove the “without regard to” language in favor of a standard that 

expressly incorporates the best interest standard of ERISA section 404. 

Compensation structures: The Department must eliminate the requirement to avoid 

compensation policies that might “tend to encourage individual Advisers to make 

recommendations that are not in the Best Interest of the Retirement Investor.” The Committee 

does not believe the Department intends to discourage the use of investment products when they 

are otherwise the most appropriate option for individual retirement investors simply because of

the relative commission amounts generated. Instead of the current proposed standard, the 

Department should look to FINRA’s comment letter, which provides a straightforward and 

simplified approach to differential compensation, requiring a firm to adopt written policies and 

procedures that are reasonably designed to ensure advisers make recommendations that are in the 

best interest of the retirement investor.22 In addition, the final BICE should have a clear 

statement in the rule or preamble that a higher commission for the sale of an annuity is not per se

compensation that will “encourage advice that runs counter to the Best Interest of the Retirement 

Investor.”

Tri-party agreement: The proposed rule requires the best interest contract to be agreed 

to by the Retirement Investor, the Adviser, and Financial Institution. The Committee is 

concerned that this requirement could have the unintended consequence of inappropriately 

requiring insurance companies whose products are sold through independent brokers to agree to 

the best interest contract when the insurance company has not provided any investment advice. 

We think the “tri-party” requirement should be removed. We are also concerned that a product 

manufacturer might become liable under the BICE as a “Financial Institution” simply because 

state law requires an insurance agent to be “appointed” by the life insurance company. As we 

discussed in our July comment letter, the product manufacturer should not be considered the 

Financial Institution unless there is no other investment advisory firm, broker-dealer, or 

insurance agency that employs or otherwise retains the individual as an independent contractor, 

agent, or registered representative.23

 

21 Hearing Transcript 524:19 – 525:22; 733:5 – 734:14; 984:13 – 19.

22 See comment letter of Financial Industry Regulatory Authority (July 17, 2015) 9.

23 CAI July Comment Letter 44.
Committee of Annuity Insurers Comment Letter re: Fiduciary Proposal

September 24, 2015

Page 11 of 12

Other warranties: The Committee would like to reiterate its request to remove other 

unnecessary warranties and promises in Section II(c) and (d) of the BICE not otherwise 

addressed. For example, the BICE’s requirement for Advisers and Financial Institutions to 

affirmatively warrant that they “will comply with all applicable federal and state laws regarding 

the rendering of investment advice, the purchase, sale and holding of the Asset, and the payment 

of compensation related to the purchase, sale and holding of the Asset.” While the Committee 

supports a standard that requires investment advisers to act in their clients’ best interest, we do 

not support a rule that would create a private breach of contract claim under any federal or state 

law (all of which will have their own enforcement regimes). The litigation costs resulting from 

such a rule will be far too burdensome and inevitably increase costs for both participants and 

providers.

IV. Substantial changes are necessary to establish appropriate grandfathering rules.

Panelists indicated that the Department is looking very hard at how to reconfigure the

proposal’s grandfathering provisions based on the number of issues identified by commenters

but did not provide any indication as to how the Department intends to craft such provisions. 

Committee members appreciate the Department’s willingness to revisit the grandfathering 

question because the BICE’s current grandfathering provision is too narrow and the proposed 

rule contains little guidance on possible grandfathering treatment for PTEs beyond the BICE. 

As discussed in our July comment letter, we believe that the BICE’s current 

grandfathering provision does not go far enough to ensure that retirement investors have access 

to much needed information regarding annuities purchased prior to the rule’s effective date.24 

Although the BICE currently provides relief for communications made prior to the rule’s 

effective date, the proposed grandfathering provision does not extend to future communications 

made with respect to annuities purchased prior to the effective date. In other words, the 

grandfather provision is, essentially no grandfather for existing products, which were never 

priced with these new rules in mind. 

The Committee is concerned that this narrow application of the BICE’s grandfathering 

provision will prevent customers from obtaining information about annuities purchased prior to 

the effective date if the communication could be considered a recommendation. This result is 

unfair for annuity purchasers who may not be able to receive the same level of support available

when they purchased the annuity contract and unfair for annuity issuers who did not have pricing 

models at the time of sale contemplating the increased regulatory cost. Accordingly, we urge the 

Department to expand the BICE’s grandfathering provision to include communications made 

after the rule’s effective date for annuities purchased prior to the effective date. Finally, if the 

Department does not expand the BICE’s grandfathering provision in accordance with this 

recommendation, the Department must permit a “negative consent” approach for existing 

customers, as discussed above in section III.B.i.

 

24 CAI July Comment Letter 42 – 43.
Committee of Annuity Insurers Comment Letter re: Fiduciary Proposal

September 24, 2015

Page 12 of 12

V. The Regulatory Impact Analysis is flawed.

A significant portion of the hearing was devoted to the Department’s Regulatory Impact 

Analysis. Although our previous comment only briefly referenced this economic analysis, we 

would like to take this opportunity to express a very specific concern about the analysis. 

In particular, the economic impact analysis fails to account for the cost to consumers 

created by the reduced access to and education for annuities that will result if the rule is adopted 

as proposed. As discussed in our July comment and above, we believe that the proposed rule, as 

currently drafted, will effectively discourage many retirement investors from annuitizing or 

purchasing an annuity in the first instance. Such a result would prevent retirement investors 

from accessing the guarantees provided by annuities in a way that is not contemplated by the 

Regulatory Impact Analysis.

To put it bluntly, unless the proposal is significantly changed, fewer Americans will have 

access to the guaranteed income that annuities provide. That creates significant risks in 

retirement that the Regulatory Impact Analysis simply fails to take into account.

VI. Re-proposal is necessary to provide clarification and resolve ambiguity.

Based on the proposed rule’s significant ambiguity, as demonstrated by the number and 

variety of interpretations offered by the Department and commenters, the Committee requests the 

Department to re-propose the definition of an investment advice fiduciary and the accompanying 

PTEs to allow for additional comments prior to issuance of a final rule. Until there is an 

opportunity to consider the significant changes the Department needs to make, it is virtually 

impossible as a practical matter for interested parties to reasonably determine the scope and 

impact of the proposed rule and to respond with comments. This fact should be apparent from 

the multiple contradictory interpretations of the proposed regulation offered by the Department, 

written commenters, and witnesses at the hearing. During the hearing, Department panelists 

repeatedly expressed an interest in reducing confusion about the rule and providing clarification 

where necessary. A re-proposal of the rule would provide the Department with a meaningful 

opportunity to accomplish these objectives.

We appreciate this opportunity to offer input on this proposal. If you have any questions, 

or if we can be of any assistance in your consideration of the issues summarized above, please do 

not hesitate to contact either of the undersigned at 202-347-2230.

Counsel to the Committee of Annuity Insurers

Joseph F. McKeever, III

Partner, Davis & Harman LLP

jfmckeever@davis-harman.com

Michael L. Hadley

Partner, Davis & Harman LLP

mlhadley@davis-harman.com
 

AIG Life & Retirement, Los Angeles, CA 

Allianz Life Insurance Company, Minneapolis, MN 

Allstate Financial, Northbrook, IL 

Ameriprise Financial, Minneapolis, MN 

Athene Annuity & Life Company, Des Moines, IA

AXA Equitable Life Insurance Company, New York, NY 

Fidelity Investments Life Insurance Company, Boston, MA 

Genworth Financial, Richmond, VA 

Global Atlantic Life and Annuity Companies, Southborough, MA 

Great American Life Insurance Co., Cincinnati, OH 

Guardian Insurance & Annuity Co., Inc., New York, NY 

Jackson National Life Insurance Company, Lansing, MI 

John Hancock Life Insurance Company, Boston, MA 

Life Insurance Company of the Southwest, Dallas, TX 

Lincoln Financial Group, Fort Wayne, IN 

MassMutual Financial Group, Springfield, MA 

Metropolitan Life Insurance Company, New York, NY 

Nationwide Life Insurance Companies, Columbus, OH 

New York Life Insurance Company, New York, NY 

Northwestern Mutual Life Insurance Company, Milwaukee, WI 

Ohio National Financial Services, Cincinnati, OH 

Pacific Life Insurance Company, Newport Beach, CA 

 Protective Life Insurance Company, Birmingham, AL 

Prudential Insurance Company of America, Newark, NJ 

Symetra Financial, Bellevue, WA 

The Transamerica companies, Cedar Rapids, IA 

TIAA-CREF, New York, NY 

USAA Life Insurance Company, San Antonio, TX 

Voya Financial, Inc., Atlanta, GA 

The Committee of Annuity Insurers was formed in 1981 to participate in the development of 

federal policies with respect to annuities. The member companies of the Committee represent 

more than 80% of the annuity business in the United States.